Digital Realty Strikes, Will Buy Telx

There really was some fire underneath the smoke this time. This morning, Digital Realty Trust announced a definitive agreement to purchase Telx for $1.886B. The deal takes Digital Realty deeper into the world of interconnection than it has previously delved, and further from its real estate roots.

Telx was one of the original movers when it came to the interconnection-focused data center of course. After plans to IPO fell through four or five years ago, the private equity groups ABRY Partners and Berkshire Partners stepped in and bought the company. Today Telx operates 20 facilities and 1.3M square feet of space. 11 of those already lie within Digital Realty's footprint, so the integration isn't likely to be all that difficult.

Digital Realty has been looking to shake up the interconnection market (in its favor) for a while now, and has been one of the big guns behind the Open-IX movement. With the purchase of Telx, which along with Equinix was on the other side of that debate, the thing to watch will be how Digital Realty's approach evolves from here.

Digital Realty has received a commitment for $1.85B from a syndicate of lenders to help pay for the deal. But they're also planning to raise money via a stock offering. This morning they also announced plans to sell 10.5M shares of stock, which would raise more than $700M of cash to help make the deal happen.

Join the Discussion!

6 Comments So Far

you should have mentioned that the eleven sites within the Digital Realty footprint are one that DRT originally sold to Telx. They were the meet me rooms in eleven DRT buildings. It would be interesting to know what price DRT is paying for them and what DRT received when the sold them to telx.

We will see how long their support of Open IX lasts since they now run their own IX’s. Telx was never a supporter of that movement, similiar to Equinix. Also gives them credibility in interconnection market to go along with the smoke screens of their previous interconnection product mix.

This is the worst possible move. DRT has like 5 employees and 4 or 5 large customers to their name. How are they going to manage thousands of Telx customers and the complex business they run. REAL ESTATE PEOPLE ARE NOT ENGINEERS. This is a clueless company that really has no business in hosting, they simply contract companies out to do all of their engineering work. Digital Realty in the past has evicted hundreds of customers out of their data centers and screwed over cloud providers and SaaS companies they are now trying to court again. STAY AWAY FROM DRT AND GET OUT OF TELX NOW. I advise any SaaS or IaaS company to never do business with this monster, just make your lives easier and pay for Equinix you will not regret it. Otherwise one day you might find yourself and your gear on the street kicked out by this evil company.